Our Bureau

Kolkata, April 29 The hike in Cash Reserve Ratio (CRR) 25 basis points, as a measure of inflation control, was foreseen though a similar hike did take place recently, according to Mr Vineet Agarwal, Executive Director, Transport Corporation of India Ltd.

The repercussion would be hardening of interest rates on funds borrowed from banks owing to a liquidity crunch. This move of RBI may help combat inflation coupled with a gradual slowdown in the economy.

“From a logistics perspective, there might be a slight fall in demand. However, it is not possible to ascertain the actual impact on demand and we would prefer to adopt a wait and watch policy. Also credit customers might be inclined to prolong credit period of their LSP vendors like us so that they have access to interest free additional funding,” he said.

Mr Kamal Baheti, Director (Finance), McLeod Russel India Ltd, said the hike in CRR will not affect the genuine credit demand of trade and industry. It will only suck the surplus liquidity out of the system, with the result the inflation will be curbed without hurting the growth process.

“The RBI’s decision is probably the best possible one under the present situation, more so because the impact on the economy would have been very different had there been changes in the repo rate or reverse repo ratesAs for the tea industry, , tea financing comes under priority sector lending which is untouched”, he said.

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